Funding questions and petitions aside, the future of Crossrail looks promising as the Crossrail Bill makes progress on its passage through Parliament. The bill is now subject to the scrutiny of the Commons Select Committee, which since January has been hearing the concerns of those who submitted objections/petitions against it. The Select Committee is likely to finish hearing petitions late in 2006, so the day for action against the bill has almost passed. True, petitions can still be lodged when the bill goes before the House of Lords, but those who have not previously made their concerns known are likely to be given fairly short shrift.
Owners of affected property
Ideally, any person with an interest in property affected by Crossrail should have already made their concerns known by lodging a petition. With 357 petitions lodged, many clearly have. However, those who have not done so need not resign themselves to thinking that nothing can now be done.
As already mentioned, there will be another opportunity to petition before the Lords, but perhaps more usefully, clients who own affected properties can require Cross London Rail Links (CLRL), the promoter of Crossrail, to confirm specifically what the likely impact of the project on their property will be. In addition, they can ask CLRL (if it is willing) to agree a protocol and methodology for the carrying out of the works so as to minimise the effect on the property. Although this does not stop the works from going ahead, knowing the order in which works will be done and how they will be performed will undoubtedly assist a client to manage their property accordingly.
As for compensation, the savvy client may well have secured a compromise agreement with CLRL already. Such an agreement is likely to cover the issue of compensation – frequently to the client’s advantage – and may also regulate the way in which CLRL carries out works. Those who have not already obtained this will need to pursue compensation through the statutory ‘Compensation Code’. This is not a single code, but a complex web of various statutory provisions. These provisions are not comprehensive and the application of them is such that any compensation available for commercial property is unlikely to cover fully the loss suffered by a client.
Buyers of affected property
The position of a client who is buying property affected by Crossrail is also problematic. Unless already an owner of an affected property, a buyer will not have been able to petition against the bill. How, then, can a client ensure that their interests are protected as far as possible?
Buyers of affected properties fall into two categories: those who are acquiring property identified for compulsory purchase, in other words blighted land; and those who are acquiring property near, but not directly subject to, Crossrail works.
A client who acquires blighted land should understand fully the risk of their purchase. The likelihood is that the client is fully aware of the limited life of any such property, but uncertainties surrounding the funding of Crossrail remain, so there may be a fair few useful years left in the life of such property. A good income stream over the next few years while waiting for construction of Crossrail to begin may well be worth the investment. Nevertheless, it goes without saying that solicitors should alert their clients when the results of the local search are received and formally identify the property as one that will be affected by the project.
What the local search will not reveal is whether the seller has entered into a compromise agreement with CLRL. If faced with a property affected by the project, it is essential to raise specific enquiries with the seller’s solicitors to ensure that any such agreements and any notices or correspondence with CLRL are flushed out. If a compromise agreement does exist, careful consideration needs to be given to its terms, as such agreements are bespoke. In particular advisers should check that the agreement is assignable and should take steps to ensure that it is properly assigned to the client when the property is transferred. If not, as the new property owner, the client will have to fall back on the Compensation Code. Although the purchase price would be taken into account when calculating compensation, often compensation does not match the market value at the time of purchase.
A client who buys near, but whose property is not actually subject to, the works faces greater difficulties. Such property is not blighted to the extent that the land will be physically taken from the owner. However, the proximity of the works to the property is likely to mean its amenities, and therefore its value, will be affected. Alongside the bill, the Government has published an Environmental Statement setting out the impact that Crossrail will have on each area. Notice of proximity to Crossrail is returned in a local search, so it is easy enough to tell when it is worth checking the Environmental Statement. The problem that arises for a client who purchases such property is that there is clearly an argument that they are buying with their eyes open and it would be difficult for the client to demonstrate that they have been ‘injuriously affected’, as is required to claim compensation under the code. CLRL is likely to argue that any diminution is reflected in the purchase price paid by the client and therefore no compensation would be due. There have been criticisms that the Environmental Statement is not detailed enough, so the real impact may be greater still than even the educated purchaser expects.
As with clients buying blighted land, enquiries should be raised to check for any compromise agreement that the client will be able to benefit from and ensure that it is assigned accordingly.
In either scenario, clients should consider whether to make the purchase conditional upon the seller entering into a compromise agreement with CLRL, which may be quite hard to achieve. This is particularly so where the property is near, but not actually subject to, the works. As an existing owner who bought the property prior to the Crossrail Bill, the seller may well be able to negotiate better terms with CLRL than a buyer would be able to, although the outcome of such negotiations is likely to be reflected in the purchase price. At the very least this will enable the client to have more certainty regarding what they are about to buy.
Last month the London Mayor launched his Campaign for Crossrail, bringing together the key stakeholders to give a boost to the search for a solution to the funding of the project. The question of funding may not yet have been answered, but much of the legislative framework to make Crossrail a reality certainly seems to be falling into place. Crossrail is undoubtedly now part of the fabric of the London real estate market, but this does not mean that clients interested in affected properties should simply accept whatever happens and not take any preventative measures that are still available to them that may secure those interests, or at the very least limit the effects of the project. n
Howard Bassford is a partner and Janice Record is a professional support lawyer at DLA Piper Rudnick Gray Cary